American Apparel CEO's bad behavior wore thin

Jun. 22, 2014
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Dov Charney announces he will shutter his garment manufacturing plant that employs some 1,500 workers, in observance of a scheduled Dec. 12 economic strike by Latinos, at a rally on Dec. 11, 2003, in Los Angeles. The board of American Apparel has voted to oust Charney as chairman. / Reed Saxon, AP

by Hadley Malcolm, USA TODAY

by Hadley Malcolm, USA TODAY

The former CEO of American Apparel has made headlines both for his championing of U.S. manufacturing and support of immigrant workers. He's also gained notoriety for his company's extremely sexual ads featuring young women, for walking around his Los Angeles office in his underwear, and for several lawsuits alleging sexual harassment.

His board decided they'd had enough. Charney, 45, was unanimously fired Wednesday night because of an "ongoing investigation into alleged misconduct," according to a statement from the company. The firm did not provide specifics.

"Boards will put up with an enormous amount of controversy when there's results," says Ken Nisch, chairman of JGA, a retail branding and design firm. "They tend to have a much lower appetite when things are challenging."

American Apparel shares are down from an all-time high of about $27 in July of 2007 to about 68 cents Thursday. According to SEC filings, Charney owns 27% of the company's stock and has a base salary of $800,000 a year.

The company, founded on Charney's love for a plain T-shirt, hasn't done enough to evolve beyond basics, Nisch says.

"What they have is a tired concept," he says. "I imagine (the board comes) to the conclusion, saying, 'He's not delivering a plan to move us forward, and we've got all these liabilities around us .. .so why are we putting up with all these liabilities when we're not seeing a clear path to the next chapter?' "

Sexual harassment controversy

Since taking on the roles of president and CEO when the company went public in 2007, Charney has been the target of multiple lawsuits alleging sexual harassment.

Former American Apparel employee Kimbra Lo filed a California Superior Court lawsuit accusing him of sexually assaulting her in 2010 at his home, during what she had believed would be a hiring interview for a new job as a company photographer.

Charney appeared in the doorway of the Los Angeles home "wearing only a towel," then grabbed Lo "and violently kissed her," the lawsuit charged.

When she protested and started to leave, Charney apologized and told her to stay, assuring her that "they would just talk about business."

Instead, he led Lo into his bedroom and "forced her to perform various sexual acts," becoming "more aggressive and violent" when she made any effort to resist, the lawsuit alleged.

After she managed to leave, Lo contacted her mother and told her of the alleged attack. According to the lawsuit, Lo's mother phoned Charney and demanded that he never contact her daughter again.

"Charney begged forgiveness and admitted he had 'a problem,' " the lawsuit charged.

Three other American Apparel female employees who are plaintiffs in the case separately alleged they were required to sign purported arbitration agreements when they were hired.

The agreements were designed to "keep employees from disclosing unlawful conduct" by the company and its executives, as well as force the women "into an unfair forum."

Referring to that case and other arbitration matters in recent Securities and Exchange Commission filings, American Apparel said two had been settled, while another resulted in an "inconsequential amount" awarded to the plaintiff.

Is the basic T tired?

Born in Montreal, Charney attended a year of high school in the U.S. at private boarding school Choate, where he started dabbling in the clothing business. He shipped Hanes T-shirts back to Montreal on a train that passed through Connecticut.

On his website, dovcharney.com, which American Apparel links to under a section titled "Meet our founder," Charney writes that coming to Choate, "I reinforced my sense that American school T-shirts were iconic, unique and in most ways, better than the T-shirts we had access to in Canada. It was my belief, at that very moment, that T-shirts were, without a doubt, an American heritage product."

Charney went on to Tufts University. He never graduated, but the college outside Boston is where he started selling T-shirts from his dorm room under the name American Apparel. Charney moved the company to Los Angeles in 1997.

In an interview with American Public Media's Marketplace earlier this year, Charney told host Kai Ryssdal that his biggest weakness is himself, saying, "I'm my own worst enemy."

He also acknowledged his knack for pushing boundaries, such as with his company's controversial billboards and advertisements of women wearing little clothing in sexually suggestive poses.

In the lengthy autobiography on his website, Charney writes about everything from his childhood in Canada and love for Montreal bagels to his decision to sell Butt magazine in American Apparel stores. Defending the decision in an e-mail to his mom, he said, "No question, that it is going to offend people and it is my feeling that that is the nature of provocative art. At times, to make progress, you end up offending people."

While Charney has remained a blunt, unapologetic leader, his brand has remained relatively unchanged, struggling to maintain its cool factor. It continues to sell basics that don't come cheap: T-shirts, sweatshirts, leggings and body-hugging spandex dresses in bold, solid colors.

American Apparel's target audience, the Millennial, "is decreasingly ... somebody who wants to wear something that clearly came from a (certain) place," Nisch says. "They're going to have to rethink their proposition of what this customer wants. It's hard to be cool year after year after year."